(2) Sales of
returnable containers when sold without the contents to manufacturers,
compounders, bottlers, etc., who place the contents in the container and sell
the contents together with the container are not subject to the sales or use
tax. The container is not subject to the tax when it is sold at retail in
connection with a retail sale of its contents. The fact that the retailer may
require a deposit against the return of the container or allows a credit upon
its return does not alter the rule. Returnable containers are not subject to
the tax when they are resold by the final buyer for refilling.

Section 3.
Nonreturnable Containers. (1) All containers other than those defined in
Section 2 of this administrative regulation are nonreturnable containers.
Examples are wrapping and packing materials, paper bags, twine, medicine and
distilled spirits bottles.

(2) Sales of
nonreturnable containers to manufacturers, compounders, bottlers, etc., for use
in packaging their product for resale which are not intended to be returned for
reuse are not subject to the sales or use tax. Bottle caps and crowns shall be
treated at all times as nonreturnable containers for use in packaging a product
for resale.

(3) Sales of
wrapping paper, clothes hangers, twine, tape and similar articles to persons
who use them to package merchandise for sale at retail are usually sales made
for resale and are therefore not subject to the tax. Sales of such articles to
persons who use them in the conduct of an activity other than sale of tangible
personal property at retail, for example, laundries and dry cleaning
establishments, are subject to the sales or use tax.

(4) Sales of
nonreturnable paper napkins, straws, and like articles to restaurants, lunch
counters, etc., who use them in connection with the sale and serving of food
are sales made for resale and are therefore not subject to the tax.

Section 4.
Labels and Name Plates. (1) Sales of labels and name plates are not subject to
the sales or use tax if:

(a) They are
affixed to a nonreturnable container of property sold; or

(b) They are
affixed to returnable containers if a new label is affixed to the container
each time it is refilled.

(2) Labels, name
plates and price tags which are permanently affixed to the product for sale
become a component part of that product and thus not subject to tax when sold
to the manufacturer to be affixed by him.

(3) Price tags,
shipping tags and advertising materials used in connection with the sale of
property or enclosed with the property sold are subject to the tax. (SU-17-1; 1
Ky.R. 706; eff. 5-14-1975; Am. 3 Ky.R. 324; eff. 11-3-1976; TAm eff. 6-22-2016.)